Romanian Companies H1 2019 Top & Bottom Line Performance

Since all BET components published their H1 2019 results during our break, we decided to bring you an overview of the H1 2019 performance recorded by the Romanian index’s components.

Top Line Performance of BET Components (%)

Source: InterCapital Research

In terms of sales, Sphera recorded the largest
relative increase as the company manged to boost their sales result by 27.3% YoY.
The increase in sales was mainly due to the increased contribution from KFC
Italy and Taco Bell operations on the back of on-going network expansion.

Meanwhile Medlife’s top line increased
by 25.7% YoY mainly as a result of significant growth in almost all of the
Group’s business lines, led on a percentage basis by Hospitals (+44%), Clinics (+30%)
and Stomatology (+34%). Furthermore, the top line was also boosted by the acquisitions
completed by the Group in 2018 and 2019.

Purcari’s top line increase by a strong 25.5% fuelled by
a strong sales performance of Bostavan wines in Poland. One should note that the
company is currently taking actions on revamping their Bostavan range, making
these results even more impressive as they display a strong potential for future
growth.

Among the energy companies, Nuclearelectrica
posted a 21.9% YoY increase in sales driven by the 22.1% increase in the
weighted average price of the electricity sold in the first half of 2019 as
compared to the weighted average price in the first half-year of 2018. Considering
that the quantity of electricity sold in H1 2019 remained virtually the same as
in H1 2018 one can concluded that the price increase was the main driver of the
rising top line. Electrica recorded a 16.9% YoY increase in sales mainly
due to positive developments in the supply segment sales that have reached RON
1,124.1m, (+18.7% YoY). Increased revenues on the Supply segment were spurred
by higher volumes supplied on the market, with quantities amounting to 2.2TWh
for 2Q19 (+10% YoY). Romgaz witnessed a 16.2% YoY increase in sales as
the company benefited from an increase of gas sales, both from internal
production and from gas purchased for resale. On the flip side, Transgaz
saw a decrease in sales in the amount of -4.2% YoY. The electricity grid
operator, Transelectrica, recorded a 5% YoY top line decrease mainly due
to the 11% YoY drop in system services revenues.

Digi ended the first half of the year with a strong
top line performance as sales increased by 15.9% YoY. Sales in Romania went up
by 6.9% YoY on the back of both prices increase and RGU growth in Cable TV and
Fixed internet & data lines. Meanwhile, sales in Hungary increased by 28.5%
YoY. However, one should note that the growth was influenced by the full consolidation
of Invitel. Furthermore, Hungary also experienced a rise in fixed services
prices starting Mar 2019 which contributed to the result. Also note that in May
Digi successfully launch mobile telephony services in Hungary through their
local network, setting the stage for an important revenues stream on this
market. Spain continued its outstanding performance with sales jumping by 53.3%
YoY as it keeps luring in mobile RGUs. In Italy, however, sales performance
stayed gloomy (-6.6% YoY) as customers preferred lower value offerings.

Conpet posted an 8.3% YoY increase in sales due to a
50.5% increase in the revenues coming from transportation subsystem on the
imports side, which dimmed the minor decline in revenues on the domestic
transportation side.

OMV Petrom, the Romanian Oil & Gas company, recorded
a solid performance with the top line increasing by 14.9% YoY supported by
higher volumes and prices of petroleum products and higher gas prices, which
offset the lower volumes of gas and electricity sales. Meanehile, Alro recorded
a slight top line decrease of -3.7% YoY due to unfavourable market conditions.

The worst performance among BET components was
recorded by BVB, whose top line fell 16.7% YoY due to a decrease of income
from commissions related to the total value of the “offers”
transactions carried out on the BVB markets.

Bottom Line Performance of BET Components(%)

Source: InterCapital Research

Despite the rising costs, with cost of sales up
44% YoY, Purcari managed to secure a solid bottom line growth of 7.2%. In
line with sales performance, marketing expenses increased by 26% YoY, being
partially offset by the 16% YoY decrease in G&A expenses. Below the operating
line, FX loss on revaluation of foreign currency-denominated debt had a negative
impact on the bottom line. As a result, net profit reached RON 17mn (+7.2%
YoY), yet if we were to exclude the non-cash FX effects, it would have
increased by 35% YoY with a 24% margin (top of guidance).

Despite the strong top line performance and the
company’s commitment to keep costs under control which translated into a modest
4.3% YoY increase in G&A expenses, Spehra’s poor Q1 dragged net profit
down 26.9% YoY.

Medlife recorded a strong bottom line improvement of
72% YoY, primarily due to the company’s top line performance as sales grew
stronger than costs. Note that this was enough to boost the bottom line despite
a deteriorating net financial result which doubled on a YoY basis.

When looking at the bottom line of Romanian
financial companies, Fondul Proprietatea leads the list as the Fund
managed to double their net profit in H1 2019 on a YoY basis. The strong
improvement was due to the net unrealised gain from equity investments at fair
value through profit or loss, whereby the greatest influence was the positive development
of OMV Petrom’s share, as well as the valuation update of Hidroelectrica. Meanwhile,
BRD recorded a net interest income increase of 11.4% YoY, combining
higher volumes and positive structure shifts, in a favourable interest rate
environment. In a context of increasing pricing pressure on some transactional
banking services, fees and commissions revenues increased by +2% compared to H1
2018, helped by intensified card activity. As a result, net profit went up by
4% YoY on the back of the robust revenues’ generation and cost of risk write
backs. Finally, Banca Transilvania recorded a 9% YoY increase in net
profit which was driven by business efficiency as cost growth amounted to 4% and
consolidation effects.

Conpet’s cost growth in H1 2019 was capped at 2.4% YoY due
to the top line development. As a result, the operating result was boosted by 69.4%
YoY, reaching RON 17.7m. This eventually led to a 44.2% YoY surge in the net
profit during H1 2019.

Company

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